Saudi Aramco is in talks with Sinopec to gain access to China’s wholesale oil products market, which the government will open to foreign investment at the end of this year, according to a Sinopec official.

In exchange, Sinopec, China’s largest refiner and retailer by volume, is seeking to build a large refinery in Saudi Arabia with an annual processing capacity of up to 12 million tonnes or 240,986 barrels per day, the official said.
The news comes after the Chinese government confirmed it will work with Saudi Arabia on developing China’s strategic oil reserves as part of efforts to deepen energy ties between the two countries.
If the talks are successful, Saudi Aramco will be a new player among other large international oil giants to take up slices of China’s huge and growing fuel distribution market, now around 90 per cent dominated by state-owned Sinopec and China National Petroleum Corp.
Aramco has been actively expanding its business in China by jointly investing to expand a refinery in southern Fujian province with Sinopec and ExxonMobil Corp at a total cost of $3.5 billion and is in talks to acquire a stake in another refinery in eastern Shandong province.
Aramco and Sinopec recently agreed to establish a marketing joint venture in Fujian this year which may oversee the distribution business.
Sinopec is also highly interested in the talks, as “it’s an opportunity to strengthen relations with Saudi Arabia and export our refinery engineering technology to the Middle East,” he said, adding the refined products may be partly sold to China.
“We may bid for more refinery projects there,” he said.
Sinopec entered Saudi Arabia’s gas sector in 2004 by acquiring rights to explore for natural gas in the country.
“The talks (on wholesale oil product market entry) are still in the initial phase, with no details fixed yet,” he said.
The talks may produce some results around the end of the year, when the Chinese government will unveil the access criteria for the domestic wholesale oil products market.
China is the world’s third largest oil products consumer, with consumption expected to rise to around 177.24 million tonnes this year, up about nine million tonnes from last year.
China is set to lift restrictions on wholesale fuel distribution by foreign companies on December 11 as part of its World Trade Organisation commitments.
Global oil giants, including Royal Dutch Shell PLC, UK-based BP and France’s Total have been preparing to enter China’s wholesale market after setting up joint refineries and retail ventures with the country’s oil companies.
They are also penetrating the country’s retail gasoline market by building up to 2,000 service stations over the next few years.
Saudi Arabia was the largest exporter of crude oil to China during the January to April period of this year, exporting 8.25 million tonness or 165,625 barrels per day, up 15.1 per cent on year.
Saudi Arabia also exported 492,277 tonnes of fuel oil, up 21.5 per cent, 384,246 tonnes of liquefied petroleum gas, down 32.5 per cent, and 74,927 tonnes of naphtha to China during the period.